The Sales and Service Tax (SST) in play a crucial role in Malaysia’s tax framework, influencing how businesses price and manage their goods and services.
Whether you're running a local business or planning to venture into the Malaysian market, grasping the nuances of SST is not just a requirement, it's a game-changer.
From ensuring compliance to enhancing operational efficiency, understanding SST can significantly impact your bottom line. Let’s explore the ins and outs of how SST works and what it means for your business.
What is SST in Malaysia? A quick overview
The Sales and Service Tax (SST) in Malaysia, reintroduced in 2018, replaced the former Goods and Services Tax (GST). The shift to SST was aimed at reducing the cost of living, especially for lower- to middle-income consumers.
Unlike GST, which applied at multiple stages, SST is a single-stage tax levied only at the point of manufacturing or service provision.
The Two Components of SST
Sales Tax | Service Tax | |
Description | Applied to locally manufactured goods and imported goods. Charged once, either at the manufacturing or importation stage. Consumers indirectly bear the cost through higher prices. Two primary rates: 5% (for essential goods) and 10% (for luxury items). Businesses with over RM500,000 in annual sales must register. | Imposed on taxable services provided by registered businesses. The standard rate increased from 6% to 8% on 1 March 2024 (except food and beverage, parking, and logistics which remain at 6%). Service providers exceeding RM500,000 in taxable services must register. |
Tax rates |
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Who must register | Businesses manufacturing or importing taxable goods exceeding RM500,000 in a 12-month period. | Service providers offering taxable services exceeding RM500,000 in a 12-month period. |
Taxable items/services | Watches, prepared foods, edible oils, tobacco, and more. | Accommodation, legal services, consultancy, engineering, digital services, insurance, transportation. |
Who is Liable to Register for SST?
Businesses in Malaysia that meet certain thresholds must register for Sales and Service Tax (SST). The Royal Malaysian Customs Department sets these thresholds based on the type of business activity:
1. Sales Tax:
Businesses involved in the manufacture or import of taxable goods.
The total sales value of these goods must exceed RM500,000 in a 12-month period.
2. Service Tax:
Businesses providing taxable services such as hotels, legal services, consultancy, and IT services.
The total value of taxable services must exceed RM500,000 annually.
For restaurants, cafes, and similar businesses, the threshold is RM1.5 million.
Once these thresholds are crossed, businesses are required to register for SST through the MySST portal. Failure to do so can result in fines and penalties.
Exemptions from SST: Who and What is Exempt?
Not all businesses or goods are subject to the Sales and Service Tax (SST) in Malaysia. The Royal Malaysian Customs Department has outlined specific exemptions to ensure essential goods remain affordable and certain sectors are not overly burdened by taxation.
Category | Exemptions |
Goods exempt from sales tax |
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Services exempt from service tax |
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Persons exempt from SST |
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SST exemption for raw materials and manufacturing |
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What Happens If You Miss SST Filing or Payment Deadlines?
Filing and paying your Sales and Service Tax (SST) on time is crucial for all registered businesses in Malaysia. The Royal Malaysian Customs Department mandates that SST returns be filed every two months, even if no tax is due. Missing deadlines can lead to serious penalties and legal consequences, impacting your business operations.
Penalties for Late SST Filing
If you fail to file your SST returns on time, the penalties can be severe:
A fine of up to RM50,000.
Imprisonment for up to three years, or both a fine and imprisonment.
Late SST Payment Penalties
For businesses that miss the payment deadline, the following late payment penalties apply:
1-30 days late: A penalty of 10% of the unpaid amount.
31-60 days late: An additional 15% on top of the initial penalty.
Over 90 days late: The penalty can reach a maximum of 40% of the unpaid tax amount.
These penalties increase with time, meaning the longer you delay your SST payment, the higher the financial consequences.
How to Avoid Missing SST Deadlines
Mark your calendar: SST returns are due every two months, so set reminders.
Hire a tax professional: This can help ensure your filings and payments are completed on time.
Use the MySST portal: The MySST portal is where businesses file returns and make payments, and using it efficiently can help you stay on track.
Failure to comply with SST regulations can disrupt your business and lead to unnecessary expenses. Always ensure timely filing and payments to avoid these costly penalties.
Maintaining Compliance: What You Need to Know
Staying compliant with Sales and Service Tax (SST) regulations in Malaysia is critical for businesses to avoid hefty penalties and maintain smooth operations. Here’s what you need to do to ensure compliance with SST:
1. Keep Accurate Records
Maintaining detailed and accurate records of all transactions, invoices, tax payments, and filings is essential.
This includes tracking both sales and services provided, the amount of SST collected, and any exemptions you might qualify for.
The Royal Malaysian Customs Department requires businesses to keep these records for at least seven years in case of audits.
2. File SST Returns on Time
SST returns must be filed every two months. Even if no SST is due for a particular period, businesses are still required to submit their returns via the MySST portal.
Filing late or missing deadlines can result in penalties that grow the longer the payment is overdue. Ensure you have a system in place or a professional to help with timely filings.
3. Understand Changes in SST Regulations
Malaysia’s tax regulations change frequently, and businesses need to stay updated. For example, the Service Tax rate increased from 6% to 8% in 2024 for most taxable services, except food and beverage, parking, and logistics.
Regularly checking updates from the Royal Malaysian Customs or engaging a tax professional can help you stay informed of changes that may affect your business.
4. Get Professional Assistance
Working with a qualified tax professional can make managing SST compliance easier. They can help with record-keeping, tax filing, and staying up-to-date with regulatory changes.
Professionals can also advise on exemptions your business may qualify for, reducing your tax burden.
5. Understand SST for Imports
For importers, compliance with SST involves calculating the value of goods, freight costs, insurance, and import duties, then applying the relevant SST rate.
This helps ensure accurate tax reporting and prevents penalties or delays at customs.
Conclusion
Understanding and complying with Sales and Service Tax (SST) in Malaysia is essential for any business, whether you're just starting or expanding in the market.
From proper registration to meeting filing deadlines and taking advantage of exemptions, managing SST efficiently can save your business from costly penalties and ensure smooth operations.
If you're looking for professional assistance to handle your SST filings, compliance, and other taxation needs, Douglas Loh offers expert services in taxation and accounting.
Whether it's navigating the complexities of tax regulations or ensuring your business is fully compliant, Douglas Loh’s experienced team can guide you every step of the way!
Book an appointment today to get the support your business needs for smooth and stress-free tax management.
FAQs
1. How do I deregister from SST if my business no longer meets the threshold?
Deregistration is possible if your business no longer exceeds the prescribed threshold.
You need to submit an application through the MySST portal, providing the necessary documentation to prove that your business no longer qualifies for SST.
2. Can I backdate my SST registration if I missed the registration deadline?
Yes, it is possible to backdate your SST registration, but you may be subject to penalties for late registration.
It’s important to contact the Royal Malaysian Customs Department for further assistance.
3. Are discounts and rebates subject to SST?
Generally, SST is applied to the final price after discounts.
However, it’s important to maintain proper records and consult the SST guidelines to ensure compliance when applying discounts or rebates.
4. Is SST applicable to digital services provided by foreign companies to Malaysian customers?
Yes, foreign companies that provide digital services to Malaysian consumers are subject to Service Tax.
This includes services such as streaming platforms, software subscriptions, and online advertising.
5. How is SST calculated on goods that are part of a promotional bundle?
SST is typically calculated based on the price of each taxable good in the bundle.
If goods are bundled together for a promotion, the SST rate will apply to each individual product based on its taxable value.
6. What is the difference between zero-rated goods and exempt goods under SST?
Zero-rated goods are taxable at a rate of 0%, meaning SST is calculated but no tax is applied.
Exempt goods, on the other hand, are not taxable at all and do not require SST calculation. It’s crucial to distinguish between the two when preparing tax filings.
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